Are Electoral Bonds a threat to democracy?

A Constitution bench led by Chief Justice of India?DY Chandrachud?will begin hearing on 31st October the case concerning the legal validity of the electoral bonds scheme that facilitates anonymous donations to political parties.

Earlier this month the 28th tranche of electoral bonds were approved for sale, ahead of upcoming provincial assembly elections in five Indian states. The Supreme Court has now referred petitions challenging the validity of the electoral bond scheme to a Constitutional bench hearing due on Tuesday.

At the same time, Attorney general R Venkataramani on 29th October posted his views to the Supreme Court on petitions challenging the "opaque" electoral bond mode of funding political parties and said the Constitution has not conferred citizens with a fundamental right to know the source of these funds while cautioning the?SC?not to enter into the policy domain for regulating electoral bonds.

Let us understand what are these Electoral Bonds and how they are considered problematic for our Indian democracy??

What are Electoral Bonds?

Electoral Bond is a financial instrument for making donations to political parties as has been first pronounced by the Finance Minister in the Union Budget 2017-18. According to the Electoral Bond Scheme, 2018, electoral bond is a bond issued in the nature of a promissory note, which shall be bearer in character. A bearer instrument is one, which does not carry the name of the buyer or payee, no ownership information is recorded and the holder of the instrument (i.e. political party) is presumed to be its owner.

The Scheme, which was notified on January 2, 2018, allows individuals (who are citizens of India) and domestic companies to donate these bonds — issued in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore — to political parties of their choice, which have to be redeemed within 15 days. A person being an individual can buy bonds, either singly or jointly with other individuals.?

No limit exists on the number of electoral bonds that a person (including corporate entities) can purchase. The amount of bonds not encashed within the validity period of fifteen days shall be deposited by the authorised bank to the Prime Minister Relief Fund (PMRF).

Why are these Electoral Bonds considered problematic??

Anonymous donations:

Electoral bonds acts against the very principles of public accountability related to political donations. Prior to 2017, political parties in India had to disclose the identity of any donor who gave more than ?20,000 (about ￡200). Now, electoral bonds allow unlimited donations to political parties, without any need for disclosing donor identity.?

Lack of transparency?

As mentioned Electoral bonds do not require political parties to mention the names and addresses of those contributing by way of electoral bonds in their contribution reports filed with the Election Commission of India annually.This will have a major implication on transparency in political party finances.? Thus Electoral bonds infringe the citizen’s fundamental ‘Right to Know’ and goes against the very principle of democracy.

Government can access Donor details

While electoral bonds provide no details to the citizens, the said anonymity does not apply to the government of the day, which can always access the donor details by demanding the data from the State Bank of India (SBI). This implies that the only people in dark about the source of these donations are the taxpayers.

Issue of Black Money Circulation?

Various central agencies like Reserve Bank of India’s (RBI), ECI, even the Law Ministry and various MPs of the Rajya Sabha had not only shown their apprehension but had also given repeated warnings to the government against the Electoral Bond Scheme stating that it has the potential to increase black money circulation, money laundering, cross-border counterfeiting and forgery.

For instance, The Lok Sabha 2019 elections have been termed as the ‘most expensive election ever, anywhere’ with a staggering Rs 55,000-60,000 crore was estimated to have been spent during the 2019 Parliamentary elections by the Centre for Media Studies (CMS) report. Lok Sabha, 2019 elections also witnessed the highest ever anonymous funding through electoral bonds. Between FY 2017-18 & 2018-19, political parties received a total of Rs 2,760.20 cr from electoral bonds.

The above statistics is staggering because they cast a suspicion on the source of those fundings. Large anonymous political donations carry with them the possibilities of money laundering and bribery.?

According to the Association for Democratic Reforms, a petitioner in the case before the Supreme Court, in the first tranche in March 2018, the BJP received 95 per cent of all electoral bonds purchased in the financial year 2017-18. In 2018-19, the party received bonds worth nearly four times those received by the Indian National Congress.When coupled with the wider scrutiny of the alleged nexus between BJP policymaking and crony industrialists, questions about accountability arise.

Thus, in a situation where donations received through electoral bonds are not reported, it can never be ascertained whether a political party has taken any donation in violation of provisions of the Representation of the People Act, 1951 which prohibits the political parties from taking donations from government companies and foreign sources.

Money laundering activities by Political Parties:

There is already a rampant nexus between money and muscle power, hence, only the rich and powerful will get the tickets to contest elections.A vast majority of these parties will never contest elections. These parties may be involved in money laundering activities or may simply be using their status to turn black money into white. For instance, as per media reports, on 21 June 2022, after scrutiny, the ECI has taken action against more than 2,100 registered unrecognised political parties for flouting rules and ordered the deletion of such 111 political parties that it found to be non-existent.

Conclusion

The Supreme Court’s upcoming hearing on the legal validity of Electoral Bonds is of utmost importance as it involves issues that are basic to electoral democracy.

As discussed there is no limit on the donations that can be made by individuals and companies through electoral bonds. Money is a major factor in elections and so the salient features of the electoral bonds scheme can well be used to distort elections. Any system of political donations should be transparent, simple, and fair and should give equal treatment to all parties. The argument that the bonds do not involve black money is meaningless because its impact, given the amounts involved and the anonymity, is the same as that of black money in elections. At the end it becomes a classic case of corruption in Politics.?